A new tariff inflation report from the New York Federal Reserve just answered a question traders and shoppers have argued about for a year: who actually pays for tariffs. The researchers studied 67 categories of everyday goods and found that, as of February, tariffs had added 2.9 percentage points to inflation on those products. Without the tariffs, prices on those same goods would have fallen by almost 1%. For currency markets, this tariff inflation report matters because it reshapes the inflation and rate story behind the dollar, and hands ammunition to anyone arguing the Federal Reserve has less room to cut rates than hoped.
67: The Number of Everyday Goods Under the Microscope
The New York Fed team did not name the 67 goods they tracked, but the scale of the sample is the point. This was not a narrow study of a handful of imported electronics or one category of clothing, it was a broad slice of the consumer basket. That is why the 2.9 percentage point tariff effect carries weight with markets. A report built on 67 categories looks less like noise and more like a signal the Fed’s own economists will have to weigh when discussing where inflation is heading into 2027.
Two Thirds: How Much of the Price Hike Comes Directly From Tariffs
Roughly two thirds of the tariff related price impact came directly from the levies themselves. The rest came from knock on effects, such as US companies that rely on imported parts and materials seeing their own costs rise and passing some of that along. That split matters for the dollar because it suggests tariffs are not a one time shock that fades once the duty is paid at the border. The knock on third keeps working through supply chains for longer, which is one reason the study’s authors said tariffs have a more drawn out impact on prices than the direct effect alone would suggest.
26 Percent: How Much of the Tariff Costs Actually Got Passed to You
Trump has argued that companies could absorb higher tariff costs rather than raise prices. The New York Fed team found that around 26% of last year’s tariff increases ended up trickling into higher consumer prices. That is a meaningful share, but it also means most of the increase did not show up at the register last year, it is still working its way through. Markets read that as a sign the inflation effect from tariffs has further to run, which keeps dollar traders cautious about declaring the tariff story over.
2.9 Points: The Core Number Behind This Tariff Inflation Report
The headline figure is the 2.9 percentage point increase in inflation on the goods studied, measured as of February. The researchers also found that for each percentage point increase in the average tariff rate, consumer goods prices were higher by roughly a quarter of a percent a year later. Annual price growth in the tracked goods peaked at the start of 2026, but consumers are expected to keep paying elevated prices into 2027. That timeline matters for currency markets because it pushes the inflation question further out than some traders assumed, which can support the dollar if it keeps the Fed cautious about cutting rates, or weigh on it if the data reads as a tax on growth with no clear end date.
Almost 1 Percent: What Prices Would Have Done Without Tariffs
The part of the report that got the most attention is the counterfactual: without the tariffs, prices on the 67 tracked goods would have pulled back by almost 1% over the period studied. This was not inflation that would have happened anyway, it was a policy choice. That distinction is exactly why the Supreme Court’s February ruling against many of the tariffs led to billions of dollars in refunds to retailers, and why the White House has pushed forward with alternative tariff measures, now running near 10% on imports from many countries, well below the earlier rates.
Which Currency Pairs Move on This Tariff Inflation Report
For the dollar, this tariff inflation report cuts both ways. Higher measured inflation can support a currency if it keeps a central bank from cutting rates, part of the dynamic already playing out in the dollar yield surge story. But tariff driven inflation is a tax on consumers and importers rather than a sign of strong demand, and markets tend to treat that kind of inflation as a drag on growth rather than a reason to buy the dollar. That tension tends to show up most in EUR/USD and USD/JPY, where traders weigh US rate expectations against growth concerns. It also matters for currencies tied to US trade flows, since the softer levies that followed the Supreme Court ruling feed into the same trade dynamics seen in the Trump Xi trade truce coverage. The backdrop echoes Europe too, where the eurozone inflation spike pushed up borrowing costs for a similar reason: price pressure that was not demand driven still forced a policy response.
What This Means for You
If you shop for everyday goods in the categories this tariff inflation report covers, prices on those items are higher than they would otherwise be, and the knock on effects from tariffs are still feeding through, so further price pressure into 2027 is plausible. For savers, the watch point is interest rates: if tariff driven inflation keeps the Federal Reserve cautious about cutting rates, savings accounts and cash deposits may keep earning more for longer. For borrowers, the logic works in reverse. If the Fed stays cautious because of readings like this one, mortgage and loan rates have less room to fall. Anyone with upcoming travel or overseas purchases should watch the dollar’s direction too, since a stronger dollar makes trips and imports cheaper, while a weaker one makes them pricier. None of this calls for a snap decision, but it is reason enough to watch how this data filters into Fed commentary over the coming months.
Risks to This View
This tariff inflation report comes with caveats. The researchers did not disclose which 67 goods they studied, which makes the result harder for outside economists to stress test. The legal status of the tariffs is also unresolved: the Supreme Court already struck down many of the 2025 and early 2026 levies, and the White House is pursuing alternative tariffs near 10%, well below the rates studied here. If those lower rates hold, the 2.9 percentage point effect could fade faster than the 2027 timeline implies. There is also the White House’s own pushback, with a spokesperson telling CNBC that the administration still expects foreign exporters to bear the cost of tariffs rather than US consumers, the opposite of what this report found. Currency markets should treat this as one data point in an unsettled policy fight, not a settled conclusion.
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This article is market analysis and commentary, not financial advice.
What the video covers
67 everyday goods. That’s the sample the New York Fed used to track tariff inflation this year. Roughly two thirds of that price jump came straight from the tariffs themselves, not other costs. One more number in this report exists, and it’s the one that flips this whole inflation story. Only 26% of last year’s tariff increases actually reached consumer prices, the New York Fed found.
That means most of the tariff bill hasn’t hit your receipt yet. It’s still working through. Tariffs added 2.9 percentage points to inflation on those goods, measured as of this February. Each one point rise in average tariffs lifted consumer prices roughly a quarter percent a year later. Annual price growth in these goods peaked in early 2026, but elevated prices should linger into 2027.
Researchers called this a slow burn, saying tariffs hit prices longer than the direct math alone suggests. Here’s that number: without tariffs, prices on these goods would have fallen almost 1% instead. That gap is why the Supreme Court’s February ruling against many tariffs triggered billions in retailer refunds. The White House’s replacement tariffs now run near 10%, well below the rates this report studied.
For the dollar, this cuts both ways: sticky inflation can delay Fed cuts, but tariffs tax growth too. That tension shows up most in EUR/USD and USD/JPY as traders weigh rate odds against growth risk. The New York Fed never disclosed which 67 goods it studied, so outsiders can’t fully check the math. The White House told CNBC it still expects foreign exporters, not US shoppers, to bear tariff costs.
That almost 1% counterfactual is the figure to watch as Fed officials weigh this data next week.
Transcript of “Tariff Inflation Report: The 5 Numbers That Explain Who Pays for Tariffs”.
I’m Vinit Makol. With 20+ years in forex and financial markets, I serve as lead analyst at Edge-Forex, covering currency markets, macroeconomics, trading strategies, and market-moving events to give traders practical insights they can actually use.